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Coherence among bilateral and regional trade and investment agreements

The international trading system is regulated by an increasing number of regional trade agreements (RTAs). The Addis Agenda highlights the importance of regional economic integration for the promotion of inclusive growth and sustainable development.

WTO Regional Trade Agreement Information System

An ever-increasing number of regional trade agreements and preferential trade arrangements, including a notable increase in large plurilateral agreements under negotiation, is a prominent feature of international trade today. Following the notification of the RTA between Mongolia and Japan in June 2016, all WTO members now have an RTA in force and, currently, there are some 433 RTAs worldwide, according to the WTO RTA database. However the distribution of the number of RTAs is highly skewed towards, with richer countries tending to have more agreements.

Maritime connectivity

Countries’ capacity to participate in international trade depends largely on their physical connectivity to world markets, such as the availability of regular shipping services for merchandise exports and imports. UNCTAD’s Liner Shipping Connectivity Index (LSCI) compares the level of maritime connectivity, in term of integration into global liner shipping networks, across countries. The maritime connectivity of SIDS and LDCs has been on the rise over the last 10 years, but remains far below the world average. This imposes additional difficulties for SIDS and LDC exporters who are competing with exporters from other countries, who can get their products to their destination faster and cheaper. 

Africa regional integration
The Africa Regional Integration Index is an online tool for assessing the degree of regional integration in Africa with a specific focus on the policy-level and on-the-ground realities. The Index is made up of 16 indicators that cut across five “Dimensions” that are fundamental to Africa’s integration: regional infrastructure; trade integration; productive integration; free movement of people; and financial and macroeconomic integration. The Africa Regional Integration Index Report 2016covers Member Countries from the eight Regional Economic Communities (RECs) recognized by the African Union. According to the report: the Trade integration dimension demonstrated the highest integration score; the Financial and macroeconomic integration dimension showed the lowest partly due to the current limitation in ensuring the convertibility of currencies; and progress in the Regional infrastructure and Productive integration dimensions are ongoing across the regions.
The first Africa Trade Week in late 2016, jointly organized by the African Union Commission, the United Nation Economic Commission for Africa (UNECA) and the Africa Export-Import Bank gathered diverse trade constituencies across Africa to exchange views on the continent’s economic transformation through trade. The Africa Trade Forum, the Africa Trade Facilitation Forum and various other events during the Week focused on key challenges for the ongoing Continental Free Trade Area (CFTA) process and highlighted issues of inclusiveness, climate change and building of research capacities on the continent, among others. The negotiations for the CFTA are ongoing, with the next Negotiating Forum scheduled to take place in March 2017 and the text of the Agreement is expected to be finished by the end of 2017. The report on the first Africa Regional Integration Index launched in April 2016 found that African economies were well advanced in the area of trade integration but not in financial and macroeconomic integration, although a number of countries were strong performers across the board. However, some countries remain skeptical of regional integration, fearing domination by richer or more powerful states.
Asia-Pacific regional integration

Asia-Pacific regional integration through merchandise trade has risen only slightly in the last decade as intraregional preferential trade agreements in force has declined from 2005 to 2015. Indeed, the increase in regional trade integration in the 1990s and early 2000s due to the proliferation of global value chains appears to have reached its limit. Hence future intraregional integration may depend on intraregional FDI and an increase in trade of goods for final consumption in the region. The intra-regional share of greenfield FDI has reached an all-time time, hitting almost 55 per cent in 2015. ASEAN in particular has emerged as a significant beneficiary of intraregional FDI. Newer investment programmes, most notably the One Belt-One Road Initiative are likely to increase intraregional FDI integration further in coming years and may provide an opportunity for countries in North and Central Asia and South and South-West Asia.

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The Asia-Pacific region has experienced a significant rise in regional integration from 2005 to 2015. Intraregional FDI has risen from 30 per cent to 52 per cent in this period. This reflects the growing importance of regional emerging economies as a source of finance for investment, with intraregional flows replacing those from traditional investors like the United States and the European Union. This has particularly been the case since the global financial crisis in 2008. ASEAN in particular has emerged as a significant beneficiary of intraregional FDI, due to the increase in production costs in China, and a concerted effort through the Initiative for ASEAN integration and other programmes to boost investment in Cambodia, Myanmar, Lao People’s Democratic Republic and Viet Nam (OECD, 2016). 
Newer investment programmes, most notably China’s One Belt-One Road are likely to increase intraregional FDI integration further in coming years. However, once again it is important to note that the majority of intraregional greenfield FDI flows have ended up in South East Asia and East and North-East Asia, while other regions remain relatively unattached. One Belt-One Road and other projects may provide an opportunity for countries in North and Central Asia and South and South-West Asia to access regional finance for investment.